HEAT-AS-A-SERVICE: A NEW FRONTIER FOR THE ENERGY INDUSTRY?

Buildings accounted for around 17% of UK emissions in 2022. The Climate Change Committee’s sobering assessment of our progress in reducing emissions highlighted the limited progress in buildings and that the rate of decarbonisation in the UK’s 28 million homes needs to accelerate dramatically If we’re to meet our Net Zero goals.

Steps are being taken by government and industry, but our performance to date has been sluggish at best. While the government remains committed to a target of installing 600,000 heat pumps per year within 5 years, today, we’re achieving just 10% of that.

The Electrification of Heat Demonstration Project has put to bed the notion that heat pumps do not work in UK homes. The findings point to the exact opposite. Heat pumps can work in a variety of housing archetypes, are three times more efficient than gas boilers, and work in cold weather environments.

This is not to say that accelerating the uptake of heat pumps is not without its challenges. The main barrier reported by participants to progressing with a heat pump installation was the disruption of having the system installed. This was reported by 47% of participants who decided not to proceed with a heat pump installation. Anecdotally, we often hear that the cost of installing a heat pump, and the possibility of needing to pay for additional measures, puts individuals off from making the switch.

So, what’s next? We have a heating technology that works in most housing types, and consumers who understand the need to decarbonise. But how do we overcome the barriers that prevent them from making the switch to low carbon solutions?

End The Status Quo

Low carbon heating needs to be more appealing for consumers. One potential solution is Heat-asa-Service (HaaS). At its heart, HaaS offers warmth as an outcome to

COMMENT

by Richard Halsey, Innovation Director, and Edmund Hunt, Design Lead at Energy Systems Catapult.

customers - rather than products (i.e., boilers) or units consumed (i.e., kWh). It can also include financing to help overcome upfront capital costs, enabling customers to better afford being warm and comfortable at home without the carbon emissions.

It could also include maintenance and insurance to limit the shock of a breakdown as well as enabling monitoring and optimisation of systems post-installation. Crucially for the customer, HaaS ends the status quo by putting the onus on businesses to achieve the desired outcome for consumers.

Putting Comfort First

HaaS could help households navigate complex choices across technology, finance, system operation and optimisation including accessing the value of being flexible whilst achieving what they want - comfort.

Using our Living Lab of almost 2,000 digitally connected homes, our research into peoples’ needs and uses of heating at home has shown that if we focused on giving people a warm and comfortable home, the switch to low carbon heating systems such as heat pumps could face less resistance and be more easily adopted.

We developed and trialled the concept of ‘Heat Plans’ where people bought a version of HaaS for comfort - these Heat Plans could then be extended to include new controls, heating systems, and energy efficiency measures such as improved insulation. In these trials we found that 85% of those households using Heat Plans would be open to switching to low carbon heating compared to just 30% of those not using a Heat Plan.

Consumers are interested in HaaS, but businesses need to make it viable and deliverable.

Business Haas Stepped Up

More businesses are developing HaaS solutions. Established companies like Centrica have launched a warm home guarantee for new heat pump installations, and Energiesprong UK is developing an integrated comfort and billing service for Net Zero retrofit. Energy Systems Catapult has worked with startups such as Sero Homes, Connected Response, and Ventive, and is working with Heatio, Perenna, E.ON, and others to bring the value of HaaS to customers. There is an abundance of products and services in development. So, why aren’t businesses selling, and consumers buying and enjoying the benefits of HaaS in the UK?

Whilst there are some clear business benefits and it has the potential to unlock uptake of low-carbon heating solutions for many customers in the UK, we do need to address the barriers if it is to work for both people and businesses and be scaled up successfully. These include concerns from HaaS providers on regulatory complexity, consumer awareness and trust, and business model viability.

The evolution from energy retail to service provision will require businesses to build more integrated solutions, but these need to be simple and easy to understand for consumers and be delivered though a foundation of trust focused on outcomes.

Recommendations For The Delivery Of Haas

To deliver HaaS, we believe: Government and innovation funding bodies need to support businesses in developing and testing a wide range of innovative and digitally enabled HaaS solutions and create the conditions to bring the most promising and appealing of these to market quickly. This needs to be collaborative working with consumers and focus on packaging technologies into outcome-based solutions.

The regulator needs to consider and introduce more sophisticated means of measuring competition that reflect the energy outcomes desired for consumers, such as keeping warm and decarbonising energy used in our homes and allow long term customer relationships to be developed that ensure value and support efficient delivery and use of energy in the home and move away from simply focusing on retail switching.

Businesses need to be ambitious and invest in developing and testing Heatas-a-Service solutions with real people, understand value and risk, collaborate to build roadmaps and associated supply chains for Net Nero heat.

For a sector primarily driven by product (e.g., boilers) sales, HaaS is a bold new frontier. To realise the full potential of HaaS, deliver comfort as the outcome, and end the status quo, businesses and wider energy industry stakeholders, policymakers, researchers, and customers need to work together to prove the desirability, viability, and scalability of HaaS.

To find out more, visit https:// es.catapult.org.uk/insight/ heat-as-a-service-is-it-all-hotair-richard-halsey-and-edmundhunt/. Or, contact: edmund. hunt@es.catapult.org.uk